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New Study Reveals The Growth And Benefits Of Alternative Legal Service Providers

Over the last ten years, a new category of legal service provider, Alternative Legal Service Providers (“ALSPs”) has emerged. Their rise has been driven by new challenges that are forcing practitioners to think differently about their businesses, and by corporations, focused on driving value to their organisations, who have been increasingly flexing their buying power. Law firms are feeling the pressure to adapt.

Mari Sako, Professor of Management Studies at Oxford Saïd, alongside colleagues at Thomson Reuters Legal Executive Institute and the Georgetown Law Center for the Study of the Legal Profession, has studied this category of providers and released the industry’s most comprehensive study to date on the emerging and fast-growing market for ALSPs.

Their report “Alternative Legal Service Providers: The Newest Segment of a Changing Legal Market” reveals a seismic shift that has already happened with 51% of law firms and 60% of corporate legal departments currently using Alternative Legal Service Providers for at least one type of service. And those numbers – in a market that they estimate accounts for approximately USD $8.4 billion dollars in legal services spend globally – are expected to grow.

Among the key findings of the study:

More than half of law firms and corporations are currently using ALSPs

  • Fifty-one percent of law firms and 60 percent of corporations report that they are currently using ALSPs in at least one service category.
  • An additional 21 percent of law firms and 14 percent of corporations plan to use an alternative legal service provider in the next year.

Specialised expertise, not cost, is often the key driver

  • For law firms, access to specialised expertise not available in-house is the most commonly cited reason for ALSP use. For some uses, meeting peak demand without having to increase permanent headcount is also rated as more important than cost in driving ALSP use.
  • Similarly, for corporations, access to specialised expertise not available in-house is frequently cited as the primary reason for using ALSPs, rather than cost.

ALSPs are being used for a variety of legal tasks

  • Corporations are most likely to use ALSPs for regulatory & compliance services (29%) and specialised legal services not available in-house (21%).
  • Law firms most commonly use ALSPs for litigation-related projects, including e-discovery (34%), document review (31%) and investigative support (29%).

‘While alternative legal services providers still make up only a fraction of the global legal services market, their influence in reshaping the legal market is significant,’ said Mari Sako. ‘ALSPs are not just about lower cost, but also about access to specialised expertise and alternative modes of delivery. Our study indicates that some corporate legal departments and law firms are responding by setting up, or considering setting up, ALSPs themselves.’

‘The legal ecosystem is rapidly evolving to the point where alternative legal service providers are no longer the new kids on the block, they now play an accepted and expanding role for legal departments and for law firms,’ said Eric Laughlin, managing director of Thomson Reuters Legal Managed Services. ‘Our study highlights the change in narrative around ALSPs: clients are no longer driven by cost savings alone, they are looking to ALSPs to bring technology, process and legal expertise. The report shows there are tremendous opportunities for growth not only for ALSPs, but also for law firms, who can use – and are using – ALSPs as partners to expand their business.’

The study surveyed more than 800 law firms and corporations – primarily US-based, including many with international and global operations — to determine who is using ALSPs, why and how they are using ALSPs, and the outlook for further growth of ALSPs in the legal market. This includes providers of legal process outsourcing, e-discovery and document review services, legal managed services, contract lawyers, and non-traditional providers, although not those involved in administrative services.

Source:  Saïd Business School, Oxford University


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